Financial Crime “SUPPLY CHAIN” risk

The Legal Sector Affinity Group (LSAG) has published an important update to its anti-money laundering (AML) guidance for the UK legal profession.

In the update it has offered guidance o

• FINANCIAL CRIME SUPPLY CHAIN RISK

LSAG SAYS

1. A supply chain refers to the end-to-end activities/actions involved in the provision of a service/product to the end customer or beneficiary.
2. This also applies to acts done in operating an account which a client holds with a firm, but this unlikely to be relevant in the legal sector.
3. A simple supply chain could involve only a few individuals / companies while a more complex supply chain could involve multiple service providers.
4. Understanding the purpose of the service you are providing and who is ultimately benefiting from it is important in being able to identify and manage any supply chain risks.
5. This could involve making preliminary enquiries of your client to help you understand the purpose of the whole instruction and how your instructions fit into the overall supply chain.
6. If necessary, you should also look beyond your own instruction to understand the totality of the transaction and identify any risks.
7. This may include taking steps to understand the role of other professionals in the supply chain, e.g., accountants or company formation agents, and ensuring that these services fit with your understanding.

READ THE FULL UPDATE OF CHANGES

Law Society UK AML guidance changes to be approved by HMT

The Legal Sector Affinity Group (LSAG) has published an important update to its anti-money laundering (AML) guidance for the UK legal profession.

The addendum to the 2023 version of LSAG's guidance contains important legislative updates, along with changes in LSAG position and supervisory interpretation and expectations.

It covers several key topics:

1. Economic Crime Levy considerations for larger firms
2. Discrepancy Reporting Guidance
3. Registers of Overseas Entities update
4. Changes brought in by the Economic Crime Act, including a new POCA de minimis limit of £1,000
5. A definition of Supply Chain Risk, which is particularly relevant in the context of financial sanctions requirements
6. Supervisory expectations in respect of evidencing Third-Party Source of Funds involved in a transaction
7. LSAG-proposed amends to the Identification & Verification approach set out in existing LSAG guidance
8. Erratum regarding Beneficial Ownership thresholds.
9. Proposed amends to Identification & Verification approach

READ IT HERE

• https://www.lawscot.org.uk/media/375635/addendum-to-the-lsag-guidance-21-november-2023.pdf

It is important to note that LSAG has taken the step of publishing intended changes to the profession’s approach to the identification and verification aspect of client due diligence, as set out in the current LSAG guidance.

The intended changes do not supersede the current HM Treasury-approved LSAG guidance.

However, given how fundamental this aspect of AML control is, LSAG wishes to give advance notice regarding the proposals prior to HM Treasury approval, in a format that allows practitioners full visibility of the proposed changes.

These changes will only take effect should HM Treasury approval be granted and will then be written into the main body of the LSAG guidance.

Next steps

The changes have been submitted to HM Treasury and, if accepted, will be integrated into the text of the next iteration of LSAG's main guidance. This will be communicated as soon as is possible.
Full details as below:
https://www.lawscot.org.uk/news-and-events/law-society-news/updated-uk-aml-guidance-published/
https://www.lawscot.org.uk/media/375635/addendum-to-the-lsag-guidance-21-november-2023.pdf